Affordable Care Act Penalty

[NotEasy]

A quick question about the Affordable Care Act penalty (shared responsibility fee).

In this website it says: "Your tax penalty (shared responsibility fee) for not having insurance is paid on your federal income taxes at the end of the year. If your taxable income is below 133% of the FPL you are exempt from this tax."

http://obamacarefacts.com/obamacare-individual-mandate.php

For a family of three, 133% of the FPL is $25,975. So does that mean if a married couple makes less than $25,975, they will be exempted from the penalty even if they have no insurance?

The thing is I do not see this exemption mentioned in the other websites about Obamacare. So are they correct?

[Gretel]

I don't think so

Anyone not having a filing requirement is exempt, anyone whose premium for the silver plan are more than 8% of his AGI is exempt, plus a number of other exemptions that do not come into play here. Then one has to look at single coverage vs family coverage.

That website is wrong and over-simplifying things.

[TaxGuyBill]

I agree with Gretel.

One the other hand, I suspect that if someone is below 133% of the FPL, in most cases the insurance would be more than 8% of their income (which would qualify for an exemption).

[NotEasy]

I agree with Gretel.

One the other hand, I suspect that if someone is below 133% of the FPL, in most cases the insurance would be more than 8% of their income (which would qualify for an exemption).

I understand someone would be exempted if the cost of insurance is more than 8% of their income. But how would they know the cost of insurance if they do not even have an insurance policy?

[TaxGuyBill]

I would GUESS that the IRS will have a database of costs.

The costs are all in the healthcare exchange databases. The IRS (and probably the tax software) will access the database to determine what the healthcare costs would be for the taxpayer in for his age and geographic location. I would THINK there would be an online look-up tool as well (and perhaps telephone access).

Again, that is a guess, but it seems logical and easily accessible to me.

[John of PA]

I thought I read somewhere that the benchmark for this is the cost of a Bronze Plan on the exchange.

[NotEasy]

I would GUESS that the IRS will have a database of costs.

The costs are all in the healthcare exchange databases. The IRS (and probably the tax software) will access the database to determine what the healthcare costs would be for the taxpayer in for his age and geographic location. I would THINK there would be an online look-up tool as well (and perhaps telephone access).

Again, that is a guess, but it seems logical and easily accessible to me.

I hope so. Otherwise we will have a catch 22 situation here. Taxpayers who do not have an insurance policy need to determine whether they qualify for the exemption. But in order to make the determination, they need to know the cost of their insurance policy which is non-existent.

[Gretel]

Some more thoughts.

Back to the original post about 133% rule. This is actually true in States that have expanded Medicaid since these people are eligible for Medicaid and will be covered. It's not true in my State.

To prove you cannot afford the insurance you will need to apply through the website or call or work with a (I forgot the official name for the trained helpers and am not close to TTB). You will need to know the amount for insurance and the credit and better have it in writing/print out for the 2014 tax return. I am sure there will be plenty of guidance until the end of the year.

[Bees Knees]

In this website it says: "Your tax penalty (shared responsibility fee) for not having insurance is paid on your federal income taxes at the end of the year. If your taxable income is below 133% of the FPL you are exempt from this tax."
http://obamacarefacts.com/obamacare-...al-mandate.php

A person below 133% of the FPL is more than likely going to be exempt from the penalty, but not for the reason mentioned on the website.

TTB Health Care Reform edition page 2-2 lists 9 categories of exempt individuals:
1) Religious conscience
2) Health care sharing ministry
3) Indian tribes
4) No filing requirement
5) Short coverage gap
6) Hardship
7) Unaffordable coverage options
8) Incarceration
9) Not lawfully present.

Those are straight from the code.

Being at below 133% of the FPL is not included above, but it is the threshold for qualifying for Medicaid under the new rules. Thus, as mentioned in other posts, if the State adopts the new federal guidlines, the individual will qualify for Medicaid and thus have minimum essential coverage under Medicaid and thus not be subject to the penalty.

That is the reason why the website says what it says.

A side note: The 133% of FPL does NOT put you at below the filing requirement. If the rule were in effect for 2013, 133% of FPL for a single individual is $15,282. The filing requirement for a single individual under age 65 for 2013 is $10,000. Thus, you can't say an individual at 133% is exempt from the penalty due to being below the filing requirement. More than likely, if the State does not adopt the new Medicaid standards, a person making $15,282 per year would more than likely not have to pay the penalty due to number 7 above (unaffordable coverage options). 15,282 X 8% = $1,223. I doubt anyone is going to find health insurance coverage for a single individual at $1,223 per year in premiums. Such an individual would qualify for a premium assistance credit making his/her share of the cost of insurance $305 per year (15,282 X 2%). Thus, if the individual making $15,282 is required to file a return and does not live in a State that provides Medicaid coverage and does not buy insurance on the State exchange for $305 per year (after the premium assistance credit), then the individual will pay the penalty for not having insurance.

[TaxGuyBill]

I doubt anyone is going to find health insurance coverage for a single individual at $1,223 per year in premiums. Such an individual would qualify for a premium assistance credit making his/her share of the cost of insurance $305 per year (15,282 X 2%). Thus, if the individual making $15,282 is required to file a return and does not live in a State that provides Medicaid coverage and does not buy insurance on the State exchange for $305 per year (after the premium assistance credit), then the individual will pay the penalty for not having insurance.

It's unusual, but a 27 year old in my area would only pay $94 per month for bronze coverage.

The problem is when a person is below 100% of the FPL, but not in a State that has expanded Medicaid. Below 100% of the FPL would not qualify for the Premium Tax Credit, but the person may not qualify for Medicaid either.

[NotEasy]

A side note: The 133% of FPL does NOT put you at below the filing requirement. If the rule were in effect for 2013, 133% of FPL for a single individual is $15,282. The filing requirement for a single individual under age 65 for 2013 is $10,000. Thus, you can't say an individual at 133% is exempt from the penalty due to being below the filing requirement. More than likely, if the State does not adopt the new Medicaid standards, a person making $15,282 per year would more than likely not have to pay the penalty due to number 7 above (unaffordable coverage options). 15,282 X 8% = $1,223. I doubt anyone is going to find health insurance coverage for a single individual at $1,223 per year in premiums. Such an individual would qualify for a premium assistance credit making his/her share of the cost of insurance $305 per year (15,282 X 2%). Thus, if the individual making $15,282 is required to file a return and does not live in a State that provides Medicaid coverage and does not buy insurance on the State exchange for $305 per year (after the premium assistance credit), then the individual will pay the penalty for not having insurance.

Can I take what you say there to mean that the 133% rule is true only in states that adopt the new Medicaid standards?

[NotEasy]

Maximum penalty

Wow, I am really confused. Is the $95 per person penalty per month or per year?

So if a single person does not have a policy for the whole year, is the penalty $95 or $1,140 ($95 X 12 months)?

[Gretel]

It's unusual, but a 27 year old in my area would only pay $94 per month for bronze coverage.

The problem is when a person is below 100% of the FPL, but not in a State that has expanded Medicaid. Below 100% of the FPL would not qualify for the Premium Tax Credit, but the person may not qualify for Medicaid either.

Yes, I agree and I believe this should read below 133% of the FPL? Anyone qualifying for Medicaid under the 133% rule does not qualify for the credit, not matter in which State he lives and if the State has adopted the expanded Medicaid.

[Gretel]

Wow, I am really confused. Is the $95 per person penalty per month or per year?

So if a single person does not have a policy for the whole year, is the penalty $95 or $1,140 ($95 X 12 months)?

Per year, that is.

[TaxGuyBill]

Yes, I agree and I believe this should read below 133% of the FPL? Anyone qualifying for Medicaid under the 133% rule does not qualify for the credit, not matter in which State he lives and if the State has adopted the expanded Medicaid.

No, I meant 100%.


If you are below 133% of the FPL but do NOT qualify for Medicaid (state did not expand), you are not eligible for "minimum essential coverage. That means you are still eligible to receive the Premium Tax Credit if your estimated income is over 100% of the FPL.